RALEIGH - A veteran of the multi-level marketing business is going on trial on federal charges related to what government investigators called a $900 million scam that bilked 1 million people across the United States and abroad.
A jury expected to be selected Tuesday will have to decide whether Paul Burks intended to mislead investors five years ago with fanciful promises of 125 percent returns at a time the economy limped out of the Great Recession.
Burks is charged with mail fraud, wire fraud and conspiracy to commit tax fraud in one of the biggest cases of the past decade involving alleged Ponzi schemes. If convicted, Burks could be sentenced to 65 years in prison and fined $1 million. The trial could run four weeks.

From a small, brick building in Lexington, North Carolina, Burks ran an online auction site. Participants were charged up to $1 to bid for the chance to buy heavily discounted consumer products like iPads. To drive customers to his auction site, Burks in 2011 launched a complicated online vehicle called ZeekRewards. It offered people who invested money, promoted the company on other websites and recruited other participants a share of auction profits.

Investments were capped at $10,000, but people could invest on behalf of their spouses, children or other relatives. Some mortgaged homes to raise their investment.

“The co-conspirators used this money, in Ponzi-like fashion, to pay other victim-investors in the scheme and to personally enrich themselves,” prosecutors wrote in a court filing last month. “Put simply, Burks lied daily to obtain hundreds of millions of dollars for the scheme.”

The Securities and Exchange Commission shut down ZeekRewards about 20 months later, calling it a Ponzi scheme on the verge of collapse.

Burks’ former chief operating officer, Dawn Olivares, and her tech-savvy stepson have made plea deals with prosecutors and are expected to testify against him. Olivares became friends and worked with Burks on multilevel marketing companies since in the 1990s. Burks asked Olivares to join ZeekRewards and prosecutors said she collected at least $7.2 million for herself.

Burks allegedly pocketed about $11 million from ZeekRewards in 2011 alone, prosecutors said. He was a former country music disc jockey and performed as a magician in nursing homes in the 1980s and ’90s. After Burks’ company was shut down, federal investigators found a massive country music memorabilia collection that has since been auctioned off to refund investors.

Though Burks and his colleagues reported to the Internal Revenue Service that investors received more than $96 million in taxable disbursements in 2011, ZeekRewards actually paid out less than $13 million that year, prosecutors said.

“The vast majority of income reported to the IRS was fictional and had neither been earned nor received by the victim-investors,” prosecutors wrote in a summary of their trial evidence. “As a result, individual victim-investors filed false tax returns with the IRS reporting phantom income that they never actually received.”

Defense attorneys counter that Burks didn’t misrepresent the ZeekRewards program and didn’t mastermind a Ponzi or pyramid scheme. The parent company behind Burks’ operations sold actual products — bids for the penny auction site or stakes in ZeekRewards, defense attorneys wrote in summing up expected trial arguments.

The ZeekRewards program collapsed under the pressure of rapid growth from more than 57,000 distinct users after the first year to 1.25 million months later just before the SEC shut it down, attorney Noell Tin wrote.

“Growth of this magnitude was overwhelming,” he said.

Nonetheless, the parent company of ZeekRewards paid out 53 percent of the $939 million it generated during its lifespan, Tin wrote. “In other words,” Burks’ attorneys said, his company “made good on the core of its promise.”

Federal investigators said earlier investors were paid with money coming from new investors as in a classic Ponzi scheme.

A court-appointed receiver said he’s recouped $356 million from ZeekRewards executives and about 9,000 investors who made big money before the collapse. About $250 million has been returned to about 107,000 claimants, attorney Kenneth Bell said in an email. His pursuit of another more than $225 million includes a bank in the former Soviet country of Moldova.

Now I did a quick check and looks like a few people fell for this scam:http://lmgtfy.com/?q=site:blackhatworld.com+zeekrewards
Read though the threads and all those people adamantly defending it, the same way they do for all the new Ponzi/Pyramid schemes that pop up all the time.

People need to use common sense and not become another sucker to these clowns with obvious scams.

The white on the grey theme is a pain to look at. The black theme on the new look is also a pain.

Anyway, this is called HYIP. Obviously there are dumb people who defend it blindlessly, but there are also smarter investors who predict when the operation is going to colapse. Its a matter of judgement when it comes to such investment and the smart ones are only a handful.

If you want to see countless people "defending" it then there are countless HYIP forums out there. What they do is raise the interest by disclosing their revenue day to day - because they need to keep the level high for newbies otherwise it will fall, and once it begins to fall, the original guy will shut down the company and take all of it away.

Well in this case its the court order. But "smarter" people will realize its stupid to base such operation in the US. Take for instance china, the trend is so hapenning now that I know of a few who fell for it. The guy's name is Zhang Jian.

Decided to go for it. I am gaining ground on $600 per day right now. That is in less than 3 months.

The biggest problem I have with this business is people thinking that it is to good to be true... All I can say to that is come see me in 6 months

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@jmdawson - KNOCK KNOCK, you haven't been around for a while and didn't renew your domain name.... if you aren't putting in time/skill and a sharp edge you will never make $600/day and anyone that tells you otherwise is just taking your money.

Ah, Zeekrewards and its cousin Zeekler...I remember in 2011 and 2012 battling these idiots on financial boards. I basically posted some math that said if they were actually doing what they were claiming to do, they were at the moment more profitable than Microsoft, which is total bullshit since that would mean that were were making $10 mil/day profit from running 100K worth of penny auctions and the fanboys went apeshit claiming that I just didn't "get it" and that Zeekrewards was a "new way to generate wealth where old math doesn't apply".

Remember that ponzi/hyip whatever you want to call it. Was thinking of dumping some money in but was not sure how much longer it had to milk it so passed. In the end seems this one they actually got the money back from the "investors" as well, guess it was just too big of a scam this time around to turn the head in the other direction.

But as usual shows you how much money can be made with "making money online".

I don't condone stuff like this but man you gotta get out early when you're doing shady shit like this.

RIP.

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I'm actually disappointed that the dude took in SIX HUNDRED MILLION DOLLARS and somehow only kept less than 5% of it. If he took let's say $100 mil and fled to a country that doesn't have extradition treaty with US, he'd be home free.

Up to 65 years in prison?
I hope they dont find he raped somebody, that could easily up the sentence to 70 years total.

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The key word is "up to". As in he could get something like 8 years when sentence is laid out. IIRC technically they could have charged him each transaction as a separate crime and ask for a sentence of 1 million years or whatever.

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